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Outside the familiar world of stocks, bonds, exchange-traded funds and other pre-packaged products, 

there are asset classes that do not fall into one of the conventional equity, income and cash categories.

There is a whole universe of Alternative Investments that you should be aware of.

These assets usually perform with low correlation to stocks and bonds. 

Alternative investments are growing in popularity as investors realize the long-term benefits of this asset class. 

Private equity

 

Private equity is a broad term encompassing the entire investment spectrum of the private capital markets and private equity firms specialize in multiple investment strategies, typically raising funds from both non-institutional and institutional investors. The funds will then be used to place investments in promising private companies. The capital is returned to investors upon an exit event such as an IPO or acquisition after the firm takes its management and performance fee. Private equity is a general classification that includes the investment in start-ups, venture capital, and financing throughout phases of a company's growth.

Venture Capital

 

Firms will specialize in early stage investing, raising funds from high net worth and institutional capital and deploying them to companies ranging in industry, geography, and funding stages. This capital source is very important for start-ups and early-stage companies that have no access to public financing as most of them lack extensive operational or revenue history. Venture capital is typically a risky asset class, but can produce outsized returns upon a successful liquidity event.

Real Assets

 

Real assets are physical or tangible assets that have intrinsic value such as real estate, oil, precious metal commodities, and agriculture land. Luxury and collectable goods also fall into this category, including wine, art, jewelry, rare coins, and specialty collections. Investors can buy real assets directly or invest with a fund specializing in real assets.

Direct investments

Investors can directly invest into start-ups and private companies as opposed to investing in a private-equity fund. Investing seed capital directly in start-ups is sometimes referred to as angel investing. This is a high risk and high return strategy for investors as many start-ups end up failing. A private company will seek investors through a private placement based on a certain valuation. Retail investors can participate in some offerings depending on the type of registration exemption the company relies upon. Companies seek investment capital throughout their life cycles', so more mature companies can also be targeted for investment.

Hedge Funds

 

These are pooled investment funds that are formed to invest in a variety of strategies and asset types. Hedge fund managers raise funds and invest with a variety of styles and financial instruments. Some of the more common hedge fund strategies include equity long-shortdistressed assetsarbitrage, and macro-trends. Hedge funds differ from private equity and venture capital funds in that they invest in public equities and generally have greater redemption frequencies and liquidity,

Private placement debt

 

Investment in debt is also a large market in the alternative space. Similar to equity, private placement bonds are not issued or traded publicly and are not required to be rated by a credit rating agency. Promissory notes or mezzanine debt are often used to finance a private company, while giving investors a steady stream of cash flows.

Fund of Funds

 

These are large vehicles that form funds to invest in other alternative investment funds. Investors inherently gain diversification by investing in multiple managers, strategies or asset classes.

We can help you analyzing what investments fit appropriately given your portfolio and risk tolerance.